Micron shares surge amid sharply higher revenue forecasts on AI-led memory demand
It was the worst week of the year on Wall Street as the Dow Jones lost 3.5% to close at 12369, its worst performance since November of last year and with 12 losing sessions in 13, the worst such stretch since Oct. 1974. The S&P 500 lost 4.3% and Nasdaq plummeted 5.3%, the worst for that index since last September.
The market’s performance on Friday wasn’t helped any by Facebook, which sold 421.2 million shares at $38 each to raise $16 billion, thus valuing the company at $104.2 billion, or 107 times trailing 12-month earnings, more than all but two S&P 500 companies. But then the stock, after opening at $42.05 and climbing to $45 in short order, sucked wind the rest of the day on record volume for a stock debut of in excess of 570 million shares to finish right back at $38, $38.23 to be exact.
The debut was also marred by the fact that not only did the shares open 30 minutes later than expected, but some traders didn’t receive confirms on their orders. An investigation is already underway.
So now the pressure is on 28-year-old founder Mark Zuckerberg to deliver and monetize the site’s over 900 million users.
Meanwhile, early in the week, General Motors announced it was pulling back from advertising on Facebook. “We currently do not plan to continue with advertising but we remain committed to an aggressive content strategy,” a person at GM familiar with the situation told the Financial Times, after it was first reported in the Wall Street Journal. GM said it would continue to expand its use of Facebook pages for its brands, but that’s free. I’ve said for about ten years now that online advertising is worthless. And in a poll by the AP and CNBC, 57% said they never click on advertising or sponsored links on Facebook. Separately, about 50% believe Facebook is simply a passing fad.
As for the issue of Facebook billionaire Eduardo Saverin, at first when I heard he was renouncing his U.S. citizenship to move to Singapore and save $hundreds of millions in taxes, I thought, smart move.
But I didn’t realize his background…that at age 13 he was on a list of potential kidnapping targets in his native Brazil, so he fled with his family to Miami for his safety; after which he attended the best prep school, became a citizen in 1998, and went to Harvard where he met Mark Zuckerberg and the other Facebook founders.
As fellow tech-billionaire Mark Cuban said, “This pisses me off.”
In Singapore, sources told the New York Post his “lifestyle is so over-the-top, the billionaire – famed for canceling interviews and speaking engagements at the last minute via text message – attracts the same kind of attention lavished on the Kardashian family in the U.S.”
U.S. Treasury Yields
6-mo. 0.14% 2-yr. 0.29% 10-yr. 1.72% 30-yr. 2.81%
The 10-year Treasury hit 1.69% intraday on Thursday, or just above the record-low intraday yield of 1.67% set last September, as the U.S. continued to act as the safe haven play with the turmoil in the eurozone, even if this is a bit misguided, given our own looming debt crisis. Overall, the 10-year rallied for a ninth straight week, the best such performance since 1998 as the yield has fallen from 2.29% the week ended March 16.
The consumer price index for April also helped bonds as it came in unchanged, up 0.2% ex-food and energy. For the last 12 months the CPI is up 2.3%, including on core.
Japan’s economy grew at a solid 1% in the first quarter (an annualized rate of 4.1%), owing in no small part to government spending following last year’s earthquake and tsunami. The 4.1% was better than the 2.2% annualized rate posted by the United States for the same period.
The news out of China was not so good as the economy continued to decelerate. Foreign direct investment for April fell 0.7% vs. a year earlier, while Citigroup, Goldman Sachs and others have been lowering their growth forecasts, generally to 7.5% for the second quarter vs. previous estimates of 8.0% or more.
To put things in perspective, China’s worst growth rate in recent years was 6.2% in the first quarter of 2009, the depths of the financial crisis. I have to admit, however, that when I see stories of rapidly increasing car inventories at dealer lots, as well as home prices continuing to fall (though longer-term this is a good thing) I get concerned because of my two holdings there (one of which is transparent, the other not so much).
The one economist I respect as much as any other, Stephen Roach, isn’t quite as sanguine as he has been but he still speaks of China having “plenty of scope for easing” to boost growth with an interest rate cut likely to happen “sooner rather than later.”
And I keep thinking that the government desperately needs a smooth political transition this fall and next winter (it’s a phased process) and must have an economy that is back on track or there could be major turmoil.
The deceleration in China’s economy is being felt at Southern California ports. In the first three months of this year, container traffic through the ports of Los Angeles and Long Beach was up just 0.6% compared with the first quarter of 2011, largely because of slowing shipments from China.
China is California’s third-largest export market, behind Mexico and Canada, but California exports to China were up only 0.4% in the first quarter from the first three months of 2011.
China, Japan and South Korea have agreed to begin talks this year on a free-trade agreement. China is the biggest trading partner of both Japan and South Korea.
“The establishment of a free-trade area will unleash the economic vitality of our region and give a strong boost to economic integration in East Asia,” said Chinese Premier Wen Jiabao.
Trade between the three reached $690 billion in 2011, up from only $130 billion in 1999, according to a Chinese government report.
Chinese gold demand hit a record in the first quarter of 2012, according to the World Gold Council. But overall, global demand fell 5%, which the WGC blamed on a sharp rise in gold prices. The average price of gold was $1690 per ounce in the quarter, 22% higher than the first quarter of 2011.
Germany’s 10-year bund traded at a record low yield of 1.40% this week and first-quarter GDP rose 0.5%, better than expected, and thus allowing the country to avoid recession after the economy ticked down 0.2% in the fourth quarter.
In forming his new cabinet, French President Hollande slashed salaries 30%, including his own.
North Dakota surpassed Alaska to become the No. 2 oil-producing state in the U.S., behind Texas. In four years, oil output has quadrupled in North Dakota to 575,490 barrels in March, according to preliminary projections. [Texas pumped 1.7 million barrels a day in February.] In Williston, N.D. – the fastest-growing small city in the U.S. – the city issued $358 million worth of building permits last year, up from $45 million in 2009.
Shares in J.C. Penney collapsed as the company reported horrendous same-store sales for the first quarter, a worse-than-expected net loss, and the suspension of its dividend. New CEO Ron Johnson’s initiatives have been a dismal failure.
Yahoo cancelled up to $19 million worth of stock options, bonuses and salary that former CEO Scott Thompson was likely to receive this year, after he was forced out due to the scandal surrounding his inflated resume (and not the health issue he cited, it seems readily apparent).
According to the Federal Reserve Bank of New York, the amount owed on student loans now stands at $867 billion; exceeding the totals for credit-card debt ($734 billion) and auto loans ($704 billion). As you’ve also seen, according to the Consumer Financial Protection Bureau, student loans outstanding total more than $1 trillion.
From the New York Times’ Andrew Martin and Andrew W. Lehren:
“94% of students who earn a bachelor’s degree borrow to pay for higher education – up from 45% in 1993, according to an analysis by The New York Times of the latest data from the Department of Education. This includes loans from the federal government, private lenders and relatives.
“For all borrowers, the average debt in 2011 was $23,300, with 10% owing more than $54,000 and 3% more than $100,000, the Federal Reserve Bank of New York reports…
“Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years, the latest data available – about double the rate in 2005….
“Ohio’s flagship university, Ohio State, now receives 7% of its budget from the state, down from 15% a decade ago and 25% in 1990. The price of tuition and fees since 2002 increased about 60% in today’s dollars.
“The consequence? Three out of five undergraduates at Ohio State take out loans, and the average debt is $24,840.”
Walter Hamilton / Los Angeles Times
“Of the estimated 37 million Americans with outstanding student loans, nearly 5.5 million are 40 to 49 years old, and more than 6.3 million are 50 or older, according to the Federal Reserve Bank of New York….
“(But) the financial benefits of college still outweigh the costs, according to studies.
“One found that lifetime earnings of college graduates average $650,000 more than that of their counterparts who completed only high school. Another concluded that the average annual take-home pay of college graduates is nearly twice that of high school-only graduates - $38,950 versus $21,500.”
Pioz, a town of 3,800 residents in the Guadalajara province of Castilla-La Mancha in Spain, racked up such huge debts during the boom years as developers stampeded to put up housing projects that the town owes 16 million euro in outstanding bills to suppliers. So, seeing as the best estimate is it could put aside 2,000 euro a year to pay outstanding debts after meeting the bare minimum of operating costs, it’s estimated it could pay off its entire debt in…7,058 years.
As Fiona Govan of the Daily Telegraph writes:
“Some three miles from the historic town center, a gleaming 11 million euro water-purification plant squats between fields of wheat, lying abandoned because the council has no money left to operate the electric pumps to supply the plant or to pay the employees. As a result, the water supply to the town frequently cuts out.
“A recycling center next door, funded in part by a grant from the EU, likewise stands gleaming and vacant. ‘We couldn’t finish the road to allow the trucks to reach the site with the rubbish. The whole project is useless,’ said a local.
“So too is the swimming pool, which was opened in 2008 and came with a price tag of 2.3 million euro.”
Hewlett-Packard is looking to cut anywhere from 25,000 to 30,000 jobs in one of the biggest mass layoffs in recent memory. Many of those impacted will be offered early retirement packages as CEO Meg Whitman deals with the company’s tumbling fortunes.
The U.S. Postal Service has decided it can no longer wait for Congress to act and will begin closing nearly 250 mail processing centers as originally planned, including 48 this summer, but will stretch out the remainder over a longer time frame, with 90 shutting next January and February so as not to impact both the election and holiday season too much. The Senate last month passed a bill that would halt many of the closings, while the House is jerking off.
But the USPS still needs some sort of action by lawmakers to address the issues of Saturday delivery and reducing health and labor costs. For example, if the House doesn’t get its act together, postal officials say they face a cash crunch in August and September because the agency owes the Treasury more than $11 billion for future retiree health benefits.
According to a study by the Employee Benefit Research Institute, nearly 50% of U.S. workers do not have health care coverage through their own employers.
The median home price in Southern California rose 3.6% in April from a year earlier to $290,000, according to DataQuick, as the market continues to stabilize. [The median fell, however, in pricier Orange and Los Angeles counties.] The percentage of sales that are foreclosures is dropping rapidly.
Well this is good. New York City added 12,000 private-sector jobs in April, bringing the total to 60,000 for the year, the best four-month performance since the 1950s, according to the state Department of Labor. The unemployment rate fell to 9.5% from 9.7% in March. Wall Street employment for April, however, was flat. [Crain’s New York Business]
So I’m reading a local obituary on a man I was aware of but didn’t know personally and because of what he did, I thought New York/New Jersey area readers may be interested.
His name was Edward “Ted” Olcott and he lived in Summit, age 86. He was a councilman here, which is how I knew of him. But…
“Ted’s first, and last, employer was the Port Authority of New York and New Jersey. He began as the supervisor of the bolt-tightening crew for the George Washington Bridge, and concluded his career in 1984 as the Port Authority’s Director of Planning and Development.
“During that long career he ran the PATH system for a time, influenced the location and later development of the World Trade Center, helped with the design and implementation of the lower deck of the George Washington Bridge, lobbied for waste-burning energy generation, the creation of one-way tolls, and the establishment of dedicated commuter bus lanes through the Lincoln Tunnel, among many other projects. He had a pragmatic but also visionary sense of how the New York metropolitan area could work and dedicated his life to making that vision a reality.”
I know from here on as I travel through the area I’ll remember him from time to time. That’s a life of accomplishment.
There is a bit of an uproar in the U.K. over a plan by Whitehall (British government) to allow civil servants based in Central London to work from home for a staggering seven weeks this summer during the Olympics and Paralympics, starting six days before the opening ceremony; a period July 21-Sept. 9. Mail and package deliveries will be suspended or diverted, raising questions over whether Whitehall will grind to a halt. The impression this gives to the private sector is not the best.
According to a study funded by the National Cancer Institute and AARP and published in the New England Journal of Medicine, drinking two to three cups of coffee a day lowered the overall risk of death 10%. But cardiologist Steve Nissen of the Cleveland Clinic said the study wasn’t “scientifically sound” because it didn’t include vital information that affects longevity, such as cholesterol or blood pressure levels.
Never mind.
The market’s performance on Friday wasn’t helped any by Facebook, which sold 421.2 million shares at $38 each to raise $16 billion, thus valuing the company at $104.2 billion, or 107 times trailing 12-month earnings, more than all but two S&P 500 companies. But then the stock, after opening at $42.05 and climbing to $45 in short order, sucked wind the rest of the day on record volume for a stock debut of in excess of 570 million shares to finish right back at $38, $38.23 to be exact.
The debut was also marred by the fact that not only did the shares open 30 minutes later than expected, but some traders didn’t receive confirms on their orders. An investigation is already underway.
So now the pressure is on 28-year-old founder Mark Zuckerberg to deliver and monetize the site’s over 900 million users.
Meanwhile, early in the week, General Motors announced it was pulling back from advertising on Facebook. “We currently do not plan to continue with advertising but we remain committed to an aggressive content strategy,” a person at GM familiar with the situation told the Financial Times, after it was first reported in the Wall Street Journal. GM said it would continue to expand its use of Facebook pages for its brands, but that’s free. I’ve said for about ten years now that online advertising is worthless. And in a poll by the AP and CNBC, 57% said they never click on advertising or sponsored links on Facebook. Separately, about 50% believe Facebook is simply a passing fad.
As for the issue of Facebook billionaire Eduardo Saverin, at first when I heard he was renouncing his U.S. citizenship to move to Singapore and save $hundreds of millions in taxes, I thought, smart move.
But I didn’t realize his background…that at age 13 he was on a list of potential kidnapping targets in his native Brazil, so he fled with his family to Miami for his safety; after which he attended the best prep school, became a citizen in 1998, and went to Harvard where he met Mark Zuckerberg and the other Facebook founders.
As fellow tech-billionaire Mark Cuban said, “This pisses me off.”
In Singapore, sources told the New York Post his “lifestyle is so over-the-top, the billionaire – famed for canceling interviews and speaking engagements at the last minute via text message – attracts the same kind of attention lavished on the Kardashian family in the U.S.”
U.S. Treasury Yields
6-mo. 0.14% 2-yr. 0.29% 10-yr. 1.72% 30-yr. 2.81%
The 10-year Treasury hit 1.69% intraday on Thursday, or just above the record-low intraday yield of 1.67% set last September, as the U.S. continued to act as the safe haven play with the turmoil in the eurozone, even if this is a bit misguided, given our own looming debt crisis. Overall, the 10-year rallied for a ninth straight week, the best such performance since 1998 as the yield has fallen from 2.29% the week ended March 16.
The consumer price index for April also helped bonds as it came in unchanged, up 0.2% ex-food and energy. For the last 12 months the CPI is up 2.3%, including on core.
Japan’s economy grew at a solid 1% in the first quarter (an annualized rate of 4.1%), owing in no small part to government spending following last year’s earthquake and tsunami. The 4.1% was better than the 2.2% annualized rate posted by the United States for the same period.
The news out of China was not so good as the economy continued to decelerate. Foreign direct investment for April fell 0.7% vs. a year earlier, while Citigroup, Goldman Sachs and others have been lowering their growth forecasts, generally to 7.5% for the second quarter vs. previous estimates of 8.0% or more.
To put things in perspective, China’s worst growth rate in recent years was 6.2% in the first quarter of 2009, the depths of the financial crisis. I have to admit, however, that when I see stories of rapidly increasing car inventories at dealer lots, as well as home prices continuing to fall (though longer-term this is a good thing) I get concerned because of my two holdings there (one of which is transparent, the other not so much).
The one economist I respect as much as any other, Stephen Roach, isn’t quite as sanguine as he has been but he still speaks of China having “plenty of scope for easing” to boost growth with an interest rate cut likely to happen “sooner rather than later.”
And I keep thinking that the government desperately needs a smooth political transition this fall and next winter (it’s a phased process) and must have an economy that is back on track or there could be major turmoil.
The deceleration in China’s economy is being felt at Southern California ports. In the first three months of this year, container traffic through the ports of Los Angeles and Long Beach was up just 0.6% compared with the first quarter of 2011, largely because of slowing shipments from China.
China is California’s third-largest export market, behind Mexico and Canada, but California exports to China were up only 0.4% in the first quarter from the first three months of 2011.
China, Japan and South Korea have agreed to begin talks this year on a free-trade agreement. China is the biggest trading partner of both Japan and South Korea.
“The establishment of a free-trade area will unleash the economic vitality of our region and give a strong boost to economic integration in East Asia,” said Chinese Premier Wen Jiabao.
Trade between the three reached $690 billion in 2011, up from only $130 billion in 1999, according to a Chinese government report.
Chinese gold demand hit a record in the first quarter of 2012, according to the World Gold Council. But overall, global demand fell 5%, which the WGC blamed on a sharp rise in gold prices. The average price of gold was $1690 per ounce in the quarter, 22% higher than the first quarter of 2011.
Germany’s 10-year bund traded at a record low yield of 1.40% this week and first-quarter GDP rose 0.5%, better than expected, and thus allowing the country to avoid recession after the economy ticked down 0.2% in the fourth quarter.
In forming his new cabinet, French President Hollande slashed salaries 30%, including his own.
North Dakota surpassed Alaska to become the No. 2 oil-producing state in the U.S., behind Texas. In four years, oil output has quadrupled in North Dakota to 575,490 barrels in March, according to preliminary projections. [Texas pumped 1.7 million barrels a day in February.] In Williston, N.D. – the fastest-growing small city in the U.S. – the city issued $358 million worth of building permits last year, up from $45 million in 2009.
Shares in J.C. Penney collapsed as the company reported horrendous same-store sales for the first quarter, a worse-than-expected net loss, and the suspension of its dividend. New CEO Ron Johnson’s initiatives have been a dismal failure.
Yahoo cancelled up to $19 million worth of stock options, bonuses and salary that former CEO Scott Thompson was likely to receive this year, after he was forced out due to the scandal surrounding his inflated resume (and not the health issue he cited, it seems readily apparent).
According to the Federal Reserve Bank of New York, the amount owed on student loans now stands at $867 billion; exceeding the totals for credit-card debt ($734 billion) and auto loans ($704 billion). As you’ve also seen, according to the Consumer Financial Protection Bureau, student loans outstanding total more than $1 trillion.
From the New York Times’ Andrew Martin and Andrew W. Lehren:
“94% of students who earn a bachelor’s degree borrow to pay for higher education – up from 45% in 1993, according to an analysis by The New York Times of the latest data from the Department of Education. This includes loans from the federal government, private lenders and relatives.
“For all borrowers, the average debt in 2011 was $23,300, with 10% owing more than $54,000 and 3% more than $100,000, the Federal Reserve Bank of New York reports…
“Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years, the latest data available – about double the rate in 2005….
“Ohio’s flagship university, Ohio State, now receives 7% of its budget from the state, down from 15% a decade ago and 25% in 1990. The price of tuition and fees since 2002 increased about 60% in today’s dollars.
“The consequence? Three out of five undergraduates at Ohio State take out loans, and the average debt is $24,840.”
Walter Hamilton / Los Angeles Times
“Of the estimated 37 million Americans with outstanding student loans, nearly 5.5 million are 40 to 49 years old, and more than 6.3 million are 50 or older, according to the Federal Reserve Bank of New York….
“(But) the financial benefits of college still outweigh the costs, according to studies.
“One found that lifetime earnings of college graduates average $650,000 more than that of their counterparts who completed only high school. Another concluded that the average annual take-home pay of college graduates is nearly twice that of high school-only graduates - $38,950 versus $21,500.”
Pioz, a town of 3,800 residents in the Guadalajara province of Castilla-La Mancha in Spain, racked up such huge debts during the boom years as developers stampeded to put up housing projects that the town owes 16 million euro in outstanding bills to suppliers. So, seeing as the best estimate is it could put aside 2,000 euro a year to pay outstanding debts after meeting the bare minimum of operating costs, it’s estimated it could pay off its entire debt in…7,058 years.
As Fiona Govan of the Daily Telegraph writes:
“Some three miles from the historic town center, a gleaming 11 million euro water-purification plant squats between fields of wheat, lying abandoned because the council has no money left to operate the electric pumps to supply the plant or to pay the employees. As a result, the water supply to the town frequently cuts out.
“A recycling center next door, funded in part by a grant from the EU, likewise stands gleaming and vacant. ‘We couldn’t finish the road to allow the trucks to reach the site with the rubbish. The whole project is useless,’ said a local.
“So too is the swimming pool, which was opened in 2008 and came with a price tag of 2.3 million euro.”
Hewlett-Packard is looking to cut anywhere from 25,000 to 30,000 jobs in one of the biggest mass layoffs in recent memory. Many of those impacted will be offered early retirement packages as CEO Meg Whitman deals with the company’s tumbling fortunes.
The U.S. Postal Service has decided it can no longer wait for Congress to act and will begin closing nearly 250 mail processing centers as originally planned, including 48 this summer, but will stretch out the remainder over a longer time frame, with 90 shutting next January and February so as not to impact both the election and holiday season too much. The Senate last month passed a bill that would halt many of the closings, while the House is jerking off.
But the USPS still needs some sort of action by lawmakers to address the issues of Saturday delivery and reducing health and labor costs. For example, if the House doesn’t get its act together, postal officials say they face a cash crunch in August and September because the agency owes the Treasury more than $11 billion for future retiree health benefits.
According to a study by the Employee Benefit Research Institute, nearly 50% of U.S. workers do not have health care coverage through their own employers.
The median home price in Southern California rose 3.6% in April from a year earlier to $290,000, according to DataQuick, as the market continues to stabilize. [The median fell, however, in pricier Orange and Los Angeles counties.] The percentage of sales that are foreclosures is dropping rapidly.
Well this is good. New York City added 12,000 private-sector jobs in April, bringing the total to 60,000 for the year, the best four-month performance since the 1950s, according to the state Department of Labor. The unemployment rate fell to 9.5% from 9.7% in March. Wall Street employment for April, however, was flat. [Crain’s New York Business]
So I’m reading a local obituary on a man I was aware of but didn’t know personally and because of what he did, I thought New York/New Jersey area readers may be interested.
His name was Edward “Ted” Olcott and he lived in Summit, age 86. He was a councilman here, which is how I knew of him. But…
“Ted’s first, and last, employer was the Port Authority of New York and New Jersey. He began as the supervisor of the bolt-tightening crew for the George Washington Bridge, and concluded his career in 1984 as the Port Authority’s Director of Planning and Development.
“During that long career he ran the PATH system for a time, influenced the location and later development of the World Trade Center, helped with the design and implementation of the lower deck of the George Washington Bridge, lobbied for waste-burning energy generation, the creation of one-way tolls, and the establishment of dedicated commuter bus lanes through the Lincoln Tunnel, among many other projects. He had a pragmatic but also visionary sense of how the New York metropolitan area could work and dedicated his life to making that vision a reality.”
I know from here on as I travel through the area I’ll remember him from time to time. That’s a life of accomplishment.
There is a bit of an uproar in the U.K. over a plan by Whitehall (British government) to allow civil servants based in Central London to work from home for a staggering seven weeks this summer during the Olympics and Paralympics, starting six days before the opening ceremony; a period July 21-Sept. 9. Mail and package deliveries will be suspended or diverted, raising questions over whether Whitehall will grind to a halt. The impression this gives to the private sector is not the best.
According to a study funded by the National Cancer Institute and AARP and published in the New England Journal of Medicine, drinking two to three cups of coffee a day lowered the overall risk of death 10%. But cardiologist Steve Nissen of the Cleveland Clinic said the study wasn’t “scientifically sound” because it didn’t include vital information that affects longevity, such as cholesterol or blood pressure levels.
Never mind.